An update on UK pension concerns

We recognize that the higher cost of living is presenting challenges for many, including some bp pensioners. We have listened to pensioner concerns and are now providing an update

bp Helios Fund  
 

The trustees of the BP Benevolent Fund (a registered charity) have worked to modernize and futureproof the fund and will rename it the ‘bp Helios Fund’. bp has also provided additional funding to enable the fund to support those most in need. 

As a result, in addition to the longstanding support this fund has provided to certain former UK employees experiencing hardship, it is offering a one-off, tax-free, cost-of-living assistance grant to UK bp pensioners on lower incomes. Details of the grant, and how to apply for it, are being sent to all those who bp understands may be eligible across the UK. For pensioners who used to work at our UK retail sites, a similar arrangement has been set up with the Retail Trust, a registered national charity for the retail sector. 

BP Pension Fund

For many years, bp provided a defined benefit pension (DB) plan, also known as a final salary pension, for the majority of UK employees. 

Like many other UK DB plans, the pensions of most bp DB pensioners¹ are guaranteed to increase annually in line with the Retail Prices Index (RPI), up to a maximum increase of 5% each year. In line with these rules, the pensions of plan participants were increased by 5% in May 2023, following a similar 5% increase in May 2022. The plan rules do allow for discretionary increases above 5% – or above RPI – but only with bp’s consent.

Some pensioners have pointed out that discretionary increases were given between 1989 and 1991 when RPI was last above 5%. However, the pension landscape has changed significantly since this period and the historic approach from that time has not been in place for many years.

Therefore, as was communicated to pensioners by the BP Pension Fund Trustee as long ago as 2007, pensioners should ordinarily expect increases to follow RPI, subject to a maximum increase of 5%. If an additional discretionary increase is granted in a particular year, it will depend upon the circumstances at the time.

2023 pension increase 

This year, bp did not agree to a request from the BP Pension Fund Trustee for an additional discretionary increase of 4% to pensions in payment, which would have made a total increase of 9%.

This was a difficult decision that bp took only after carefully considering many factors, including those noted below.

Balancing the interests of other retirees and employees:

• bp has 43,000 retirees in the UK and has more than double that number in other countries, nearly all of whom have experienced inflation above 5%. Most are not in inflation-linked final salary pension schemes.
• Applying discretion to provide an additional increase for all UK DB pensioners only would not be appropriate for a global company.
• We also need to be fair to bp UK employees – so we don’t benefit one group of stakeholders disproportionately. In the last 10 years, the total increases to UK DB pensions have been almost the same as total increases to UK salaries. 

Balancing the interests of other stakeholders:

• Providing the requested increase of an additional 4% to UK DB pensioners would have created an additional material liability of approximately £400 million that would hit bp’s P&L.
• The Trustee of the BP Pension Fund recently reported that the BP Pension Fund was in surplus. However, having a surplus does not mean that it should be used to fund discretionary increases. The surplus provides an additional layer of protection for members’ benefits through ups and downs of the UK and global economic cycles for the lifetime of every member – pension payments are expected to continue to 2080 and beyond.
• The surplus reflects regular funding from bp and the thoughtful management of investments and risks by the BP Pension Fund Trustee over time. Since the Fund closed to new joiners in 2010, bp has paid in almost £4bn; during that same timeframe, members have paid £150m.

We look forward to holding an information session for all UK DB pension plan participants this month, where we will answer questions on UK pension concerns. We have sent details to BP Pension Fund members about how to attend. 

¹except any guaranteed minimum pensions (GMPs). Note: the GMP is an alternative way to receive part of the UK State pension (“contracting out”). Special rules apply to GMPs